Cloudera, Inc. (NYSE:CLDR) shareholders should be happy to see the share price up 11% in the last quarter. But that doesn’t change the fact that the returns over the last year have been less than pleasing. In fact, the price has declined 22% in a year, falling short of the returns you could get by investing in an index fund.
Given that Cloudera didn’t make a profit in the last twelve months, we’ll focus on revenue growth to form a quick view of its business development. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last year Cloudera saw its revenue grow by 64%. That’s well above most other pre-profit companies. The share price drop of 22% over twelve months would be considered disappointing by many, so you might argue the company is getting little credit for its impressive revenue growth. On the bright side, if this company is moving profits in the right direction, top-line growth like that could be an opportunity. Our brains have evolved to think in linear fashion, so there’s value in learning to recognize exponential growth. We are, in some ways, simply the wisest of the monkeys.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. You can see what analysts are predicting for Cloudera in this interactive graph of future profit estimates.
A Different Perspective
Given that the market gained 20% in the last year, Cloudera shareholders might be miffed that they lost 22%. While the aim is to do better than that, it’s worth recalling that even great long-term investments sometimes underperform for a year or more. Putting aside the last twelve months, it’s good to see the share price has rebounded by 11%, in the last ninety days. Let’s just hope this isn’t the widely-feared ‘dead cat bounce’ (which would indicate further declines to come). I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Be aware that Cloudera is showing 2 warning signs in our investment analysis , and 1 of those is a bit concerning…
Cloudera is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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